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Gates says he and Manafort disguised foreign income as loans

ALEXANDRIA, Va. (AP) — Paul Manafort’s longtime deputy told jurors Tuesday how he spent years disguising millions of dollars in foreign income as loans to lower the former Trump campaign chairman’s tax bill.

Rick Gates, the government’s star witness, recounted how he and Manafort used more than a dozen offshore shell companies and bank accounts in Cyprus to funnel the money, all while concealing the accounts and the income from the IRS.

“In Cyprus, they were documented as loans. In reality, it was basically money moving between accounts,” Gates said during his second day of testimony in the financial fraud trial of his former boss.

Prosecutors summoned Gates, described by witnesses as Manafort’s “right-hand man,” to give jurors the first-hand account of a co-conspirator they say helped Manafort carry out an elaborate offshore tax-evasion and bank fraud scheme. Gates also provided the first witness testimony that overlaps with Donald Trump’s presidential campaign.

Manafort’s defense attorneys have sought to paint Gates as an embezzler, a liar and the instigator of any criminal conduct. They have tried several times to impugn his credibility before the jury.

Gates walked into a packed courtroom a day after he calmly acknowledged having embezzled hundreds of thousands of dollars from Manafort and said the two had committed crimes together by stashing money in foreign bank accounts and falsifying bank loan documents.

Manafort and Gates were the first two people indicted in special counsel Robert Mueller’s investigation into potential ties between Russia and the Trump campaign. But Gates pleaded guilty months later and agreed to cooperate in Mueller’s investigation of Manafort, the only American charged by the special counsel to opt for trial instead of a guilty plea.

The case against Manafort has little to do with either man’s work for the Trump campaign and there’s been no discussion during the trial about whether the Trump campaign coordinated with Russia — the central question Mueller’s team has tried to answer. But Trump has shown interest in the proceedings, tweeting support for Manafort and suggesting he has been treated worse than gangster Al Capone.

On Tuesday, Gates did connect one part of the bank fraud charges against Manafort to his role in the Trump campaign.

The 46-year-old former political consultant told jurors how Manafort asked for tickets to Trump’s inauguration so he could give them to a banker involved in approving a loan at the center of his financial fraud trial. Gates also said Manafort floated banker Stephen Calk’s name for consideration as Secretary of the Army, a post he ultimately did not get.

The email exchange about Calk occurred after Manafort left the Trump campaign but while Gates was active on the Trump inauguration committee. Prosecutors had previously said that Manafort’s interactions with Calk were the only part of the trial expected to overlap with his Trump campaign role.

The testimony came as prosecutors wrapped up their questioning of Gates mid-afternoon Tuesday. He is expected to face a bruising cross-examination as defense lawyers try to undercut his credibility and pin the blame on him.

Ahead of that barrage, Gates has implicated himself in a vast amount of criminal conduct on the stand, an apparent strategic decision by prosecutors as they hope to take some of the steam out of the defense’s questioning.

The face-off between longtime business associates and former senior members of the Trump campaign drew scores of people who waited in line for hours outside the courthouse and then jammed into both the courtroom and an overflow room that contained a video feed of the proceedings.

In testimony Tuesday, Gates laid responsibility squarely at Manafort’s feet for a series of crimes, as he described to jurors how he repeatedly submitted fake financial documents at Manafort’s behest as his former boss became concerned he was paying too much in taxes and, later, that his funds were drying up.

In one email, Manafort wrote “WTF” and “not happy” about tax payments he was going to have to make, Gates said.

In other testimony, Gates recounted how he falsified documents for Manafort, including converting a PDF of a profit-and-loss statement to a Microsoft Word document so he could doctor it to inflate the business’ income.

Gates also fabricated a forgiveness letter for what he said was already a fake loan between Manafort’s consulting company and a Cypriot entity he controlled.

Prosecutor Greg Andres pointed out that he had created a “loan forgiveness letter between Mr. Manafort and Mr. Manafort.”

“Yes,” Gates agreed.

During the testimony, Manafort did not stare Gates down as he did Monday. Instead, he glanced up at his former protege periodically but mostly studied documents displayed for the jury on a screen in front of him.

When the trial broke for lunch, Manafort looked back at his wife, sitting in the front row, smiled and winked at her, followed by a quick shake of his head, seeming to indicate he was unfazed by the morning’s testimony.

Still, that testimony has provided jurors with a damning account as Gates testified that he and Manafort knew they were committing crimes for years.

In addition, Gates has admitted to other criminal conduct.

Gates, who is awaiting sentencing, told jurors that he siphoned off money without Manafort’s knowledge by filing false expense reports. He also committed credit card and mortgage fraud, falsified a letter for a colleague involved in an investment deal and made false statements in a deposition at Manafort’s direction.

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